Cisco raises full-year guidance despite sales decline

Cisco (CSCO) topped its fiscal third quarter earnings expectations and raised its full-year guidance despite sales dropping 13% year-over-year. The company pointed to Splunk, its recently acquired software subsidiary, as a catalyst to its future growth.

Yahoo Finance's Seana Smith and Brad Smith break down Cisco's latest earnings and what they signal for the company's trajectory.

For more expert insight and the latest market action, click here to watch this full episode of Morning Brief.

This post was written by Melanie Riehl

Editor's note: The headline was updated to more accurately characterize Cisco's results.

Video transcript

Cisco shares.

They are higher in pre market trading, and now that trading is commenced, it's down by about 1.5%.

After the Tech company, they had topped fiscal Q three earnings expectations, plus raised the full year revenue forecast.

In spite of the beat, sales dropped 13% during this quarter compared to last year.

Cisco, saying Splunk, its recently acquired software subsidiary, will be a catalyst for further growth here.

And so one of the huge things I was looking through, this earnings call transcript I didn't have a chance to listen into this one yesterday, but it's all gonna continue to come back to, and I mean, stop me if you've heard this before but the amount of a I mentioned seemingly, a company is able to weave into their demand narrative going forward at this juncture, and Cisco attempted to do just that as well.

Here, Even with the speed on the top and bottom, I think there's still a lingering question of how a creative that will be to the business in a near term period of time for a lot of investors out there.

Yeah, and take a look at the analysts reaction here.

A lot of focus here is, is coming on their analyst day, which is going to take place next month in June 4th.

That could be the next catalyst here for the stock going forward.

But you're right, Brad, to call out a I. I think that's one of the bullish thesis here when we talk about this stock and why so many people are seeing reason to buy, at least at this point.

It's also important, though, to point out that Cisco has been an underperformer since the start of the year.

When you take a look at that year to date chart here, we have it up on your screen.

It's actually declining about 2.8% nearly a 3% drop here since the start of the year.

And that's compared to the S and P 510 11% climb that we've seen since January 1st.

So I think a lot of people are looking at this name and seeing that we could potentially look at some upside here for Cisco when you talk about the spend that companies are are allocating towards a I.

When you talk about the spend that they're allocating towards cloud, and that was enough to give that upbeat fourth quarter forecast.

But we need to a look at the underlying factors right now.

There still is some weakness surrounding Cisco stock, and that's a big reason why you're looking at shares off just about 1.5% today.

Yes, absolutely.

And investing a lot right now in terms of where they're seeing the demand, whether that be on customers who are investing in private data centres, collaboration.

They're saying that's being positive, but also even in the security realm here.

So I think this an era and this has kind of been one of the underlying themes of this season where companies are spending because of the demand that they're seeing in order to scale up, to continue to deliver at scale.

I should say for a lot of the customers that are asking them for many of the services in this case for Cisco, the cyber security element, the of course cloud element, but then the data centre and and a I weave in as well they're spending that happens on the front end for Cisco.

In order to realise more of the long term contracts from their portfolio clients,